New IBM Server Targets Mid-Range Market

The p650 server also represents a price decrease from the p660, which it replaces. Like the p660, the new offering can handle the many server chores required of mid-size enterprises, including supply administration, CRM tasks and database management.

A Faster Chip

IBM was able to reduce the price of the p650 partially because the new server uses the company's Power4+ chip, an enhanced version of its Power4 line.

Chips in IBM's Power4 family are built with two processing cores, giving them a distinct advantage over many of today's single-core chips and enabling IBM to build an eight-way server simply by adding four chips to the unit -- a significant savings for the manufacturer. IBM launched the processor line late last year, originally using it in its higher-end Regatta servers.

The Power4+ is fabricated on the .13 micron manufacturing process, which IBM claims makes it more energy efficient and faster than previous Power4 chips.

The chip in the p650 is available at a speed of either 1.2 GHz or 1.45 GHz.

Big Blue's Autonomy

IBM's autonomic computing features, which allow effective server maintenance with fewer personnel, have proven attractive to buyers in the high-end server market.

With the p650, some of those features are migrating to the mid-range. For example, the p650 will include IBM's Dynamic Processor De-Allocation, which helps guard against system failure.

"We're now expanding our autonomic capability across our entire product portfolio," IBM spokesperson Michael Loughran told the E-Commerce Times.

Profit Margins

Although servers powered by Intel (Nasdaq: INTC) chips hold a larger share of the server market, Unix boxes tend to offer their manufacturers higher profit margins. Businesses typically spend more than six figures on Unix servers.

In contrast, the base version of the p650 retails for US$30,000 -- a distinctly mid-range price -- though if all potential options are added its price can rise to $130,000.

Tight Race

In the high-end sector, IBM's Regatta servers have captured more than 50 percent of the market, according to research firm IDC. But in the mid-range market, IBM lags behind Sun and HP (NYSE: HPQ) .

Since the late 1990s, the three companies have continuously jockeyed for position. IBM has used its ability to include business services or additional PCs to make its server deals more attractive.

Yet analysts claim Sun remains the market leader in the eight-way server market.

With the release of the p650, IBM is offering a server in a very similar price range to that of comparable Sun models. But according to IBM, its new server runs faster than similar Sun units because of its Power4+ chip.

Because it fabricates its own chips, IBM contends that it will be able to sell a variety of server configurations at attractive prices.